Tally the benefits of high-tech credit

THE ISSUE The state tax department is liberalizing standards to qualify for high-tech credits.

AN analysis to be released next week is expected to present information on the benefits Hawaii may have reaped from a generous tax credit offered to high-tech businesses and investors.

But the report from the Tax Review Commission is not likely to lay open specifics on how much new money and jobs have been generated through the credit, leaving the public largely in the dark as to whether the credit is achieving legislative intent -- to advance a tech industry here and diversify Hawaii's economy.

Without accountability, it seems ill advised for the state Department of Taxation to ease the rules for businesses to qualify for the credit.

Through Acts 221-215, the credit allows a tax break of 100 percent for investing in high-tech ventures in Hawaii. That means for every $1 invested, $1 is taken off a company's tax bill, up to a total of $2 million.

From fiscal years 2001 through 2004, the state has issued $184.5 million in credits to be claimed over five years. Thus far, the state has waived $74.9 million in claims from its bank account.

Proponents contend the credit has boosted an industry that otherwise would go elsewhere, but absent any data, it is unknown if costs and benefits balance out.

The names of companies that take advantage of the credit are kept confidential even though it would not be unreasonable for their identities to be known. In addition, the state does not compile information, such as job creation and economic impact, that could identify advantages and give legislators and the public a basis on which to judge the program's value.

Meanwhile, a survey earlier this year by the American Electronics Association pegged the number of high-tech jobs in Hawaii near the bottom nationwide for the last six years, indicating employment growth isn't robust.

Ann Chung, vice president of the Hawaii Science & Technology Council, contends it is safe to assume that the credits have put money in the state's economy. That might be, however, with the considerable amount of tax dollars the state is forfeiting, the public should receive a clear accounting, not merely assumptions.